Nestle, Cuba lay first stone for $55 million coffee and biscuit factory

HAVANA (Reuters) - Cuba and Swiss firm Nestle (NESN.S) on Tuesday laid the first stone of a $55 million coffee and biscuits factory joint venture in the Mariel special development zone, the latest major foreign investment in the Communist-run island.

Nescor is Cuba’s third joint venture with Nestle and reflects President Raul Castro’s drive to attract international capital to help update the Soviet-style command economy and stimulate growth.

Cuba created the zone around the Mariel port just west of Havana four years ago, offering companies significant tax and customs breaks. Its aim to replace imports with Made in Cuba goods has become all the more pressing because aid from socialist ally Venezuela is falling, resulting in a cash crunch.

Nestle Vice President Laurent Freixe said in an interview after the symbolic stone-laying ceremony that negotiations with Cuban partner Coralsa and Mariel authorities had taken just 18 months, a “record speed”.

The factory would be operating at the end of 2019 manufacturing coffee products, said Freixe, head of Nestle’s Americas division. Biscuits and other culinary products would come later. The company exports goods to Cuba and the other two joint ventures are one producing ice cream and the other bottled water and other beverages.

Nescor goods would be destined both for the Cuban market and tourists visiting Cuba, while it could eventually also export Cuban coffee, Freixe said.

Nestle last year already exported Cuban coffee as a limited “Cafecito de Cuba” edition of Nespresso single-use brewer pods, including to the United States.

“It sold at an impressive speed,” said Freixe. “Within a few days that line was sold out, which shows the potential.”

Before being able to export Cuban coffee, Nestle would first need to help Cuba increase its harvest, Freixe said, which has steadily declined since the 1959 revolution.

The new factory could double Nestle’s turnover in the country over the medium term from $135 million currently, he said.

So far, Cuba has approved 31 projects for the Mariel zone including nine with multinationals, Director Ana Teresa Igarza said at the ceremony.

There was no longer the same flurry of business interest in the zone as when it was created but the interest that remained was more serious, she said.

Mariel was on the list of Cuban entities that the administration of U.S. President Donald Trump banned U.S. firms from doing business with.

Just one U.S. company, Rimco, the Puerto Rican dealer for heavy machine maker Caterpillar (CAT.N), has signed a deal with Mariel to open up shop there, getting approval just on time before the new U.S. regulations were issued earlier this month.

Igarza declined comment on whether Mariel continued to negotiate with other U.S. companies but said it would be open to doing so.